Trend Watch: Will California Mortgage Rates Rise in Second Half of 2018?

Mortgage rates in California and nationwide have risen a bit since the start of 2018. The big question among home buyers and refinancing homeowners is this: What will rates do going forward?

Will California mortgage rates continue their upward climb through the second half of 2018? Or will they level off a bit in the coming weeks? Here are the latest trends and forecasts, at the start of summer 2018.

California Mortgage Rate Trends: Summer 2018

Before we start talking about the latest forecasts for mortgage rates, let’s take a look back at the major trends from the first part of this year.

During the first week of January 2018, the average rate for a 30-year fixed mortgage loan was just below 4%. That’s based on the weekly industry survey conducted by Freddie Mac.

Since then, mortgage rates in California and nationwide have followed a more-or-less upward trajectory. And they’ve risen quite a bit.

In its latest survey, published on June 21, Freddie Mac reported that 30-year mortgage loans had an average rate of 4.57%. That was an increase of 62 basis points (0.62%) from the first week of 2018.

That’s the most notable trend for California mortgage rates — they’re higher now than at the start of this year.

Two Forecasts Suggest They Could Climb Further

But what about going forward? What’s the forecast for California mortgage rates through the end of 2018, and into the first part of 2019? Could borrowing costs continue to climb?

Unfortunately, no one can predict future economic trends with complete accuracy. And that applies to mortgage rate forecasts as well. But that doesn’t stop housing analysts and economists from making educated guesses. And there appears to be some general consensus in this area.

Two recent forecasts predicted that mortgage rates in California and nationwide could rise further during 2018, perhaps ending the year just below 5%. If so, that would make a good argument for buying a home sooner rather than later. These rate forecasts were issued in mid-June by the Mortgage Bankers Association (MBA) and Freddie Mac.

In a news release published on June 21, 2018, Freddie Mac’s research team predicted that the average rate for a 30-year home loan would rise to 4.9% by the end of 2018. In a similar forecast published a week earlier, economists from the MBA essentially made the same prediction — that rates would end up averaging 4.9% by year’s end.

Thus far, however, rising mortgage rates haven’t had much of an impact on home-buying activity. Buyers are still out in full force, competing for limited inventory in many cases. In the Freddie Mac news release mentioned earlier, the company said:

“This year’s hike in mortgage rates is not having a large impact on homebuyer demand or sales … prospective buyers are active and looking in most markets, but supply is very low, competition is swift and higher mortgage rates and home prices are squeezing the budget of some prospective buyers.”

So those are some of the biggest mortgage rate trends and forecasts for California. Here’s an updated look at home prices in the state.

Home Prices Continue to Rise in Most Areas

The prospect of additional rate increases might create a sense of urgency among home buyers in California. Especially when you consider that home prices in the state continue to rise.

According to the latest MLS and real estate reports, the median home value in California rose between 8% and 10% over the last year or so. The statewide median home price was around $543,000 as of late June 2018. Some real estate markets — like those in the Bay Area and Silicon Valley — are much more expensive.

Related: Home price forecasts into 2019

Additional gains are expected in most cities across the state. In fact, most housing markets in California are predicted to see home-price gains that exceed the national average over the next year. And that’s no surprise, when you look at the skewed supply-and-demand situation that’s occurring in most cities.

Disclaimer: This article contains mortgage rate forecasts and trends for California and the rest of the nation. This information was provided by third-party sources outside of our company. We have presented them here as an educational service to our readers.